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When it doesn’t trickle


The Republicans have paid unfettered, blind obeisance to the dogmatic tenet that government mandated redistribution of wealth is an abomination in a free market society for so long, that even some Democrats can no longer see the forest for the trees.

“Redistribution of wealth” is the singular, most dreaded anathema of the Republican objection to anything proposed that touches upon the economy. But in these changing times, this abhorrence of what may become an essential ingredient to our continued peace and prosperity needs to be reexamined.

Since around 1980 to current times, the inequality of income and wealth has gradually but dramatically shifted in the United States to the point where it might be reaching into dangerous proportions. From the end of the pre-Reagan era, around 1980, to the advent of the 2008 recession, being the halcyon period of supply-side economics, the incomes of the wealthiest 1% increased by a whopping 275%. The incomes for the top 40%, excluding the tip, increased around 63%, not bad and very comfortable; but the lower 60% did not fare nearly as well and the bottom quintile increased only 18% in close to 30 years.

From 2007 to the present, through the recovery and into the post-recession boom, in every other sector of the economy other that wages and incomes, the post-recession recovery has been spectacular. In every measured way we have returned to record levels in the financial markets, in manufacturing and production, in construction starts, in GDP, in the international value of the dollar, and in exports and imports.

In wages and incomes, it’s different. The raw employment numbers have almost returned to pre-recession levels, but the values in that employment have become even more lop-sided. The top 1% recovered much faster, with top incomes growing an additional 20%; however, incomes for the rest of the 99% have stayed flat, increasing overall less than 1%, with the bottom quintile actually losing ground. At the very tip of this number reside the top 400 wealthiest families, who now own more wealth than the entire bottom 50% of the population combined – more than the 150 million or so struggling at the bottom of the scale.

The upshot of all these numbers and percentages is that supply-side economics, or “Reagonomics,” or tickle-down economics, from the standpoint of producing a balanced economy that maintains a level field of opportunity for wages and incomes, with natural re-distribution flowing from internal market forces, does not work. The wealth and power is steadily amassing at the pinnacles. It does not trickle down. The only dramatic impact over almost 40 years of trickle-down economics has been the gradual eradication of the middle class labor force and significant impediments to the small and medium class independent businesses. We are left with the fabulously wealthy 0.1% of us growing even more fabulously wealthy; with the comfortably wealthy 1% of us staying comfortably wealthy; and with the remaining 99% of us losing ground. This group is largely beginning to sag and to struggle, and the pressures are beginning to build.

The shifting of wealth into the hands of the few amasses power in those hands, and with power comes additional pressures upon legislative bodies – state and federal – for protective measures to insulate the wealthiest proponents. While the Republican mantra may seem to be “no government regulation” period, the real mantra coming from the mouth of each of the most powerful is “no government regulation except for me.”

A prime example is the tax code, an impossible labyrinth of arcane and indefensible examples of outrageous favoritism, which everyone – right and left alike – agree should be scrapped and reconstructed from the ground up. Yet everyone – right and left alike – also agree that to attempt to do so in the present atmosphere of Congress would be a waste of time. Someone estimated that there are four highly paid lobbyist lurking the halls for every member of Congress, everyone with a different pet tax feature that they would insist be included in any attempt to rewrite the code.

If something is not done to turn this trend around and to rebalance the economy into a smoother curve of wealth across the entire population, it is going to tip over. The possible, if not probable result, if the situation continues to worsen, is a revolution. Perhaps it could be a bloodless revolution such as sustained the British as they reorganized their economy from one controlled by the medieval baronage system to the forerunner of the modern capital based system of today; or perhaps it will be as bloody as the French Revolution of the 18th century or the Russian Revolution of the 20th. If anyone is still shaking their head thinking it will never happen in modern times, all they need do is look at television, take note what is happening in many of our cities on almost a fortnightly basis, and multiply these events by any progression of numbers one picks, from 1 to 100. All that has to happen is for the present situation to continue to fester without relief.

From the standpoint of the progressive advocacy, it is not that the government should act, it is that there is no one else to act. There is no natural impetus to cause the private sector to favor more equitable balancing of wages and incomes, and most business leaders are not addressing this themselves. The fundamental principle of a free market economy is survival of the fittest, with no regard given in any respect to the individual or humane interests of the members of the economic element labeled “labor.” The assumptions from a pure economic standpoint is that all business entities are equal, and that “labor” is fungible, mobile and perfectly reactive to market forces, when in fact and individually, none of these characteristics are true. While we have many laws to protect the humane elements of the workplace – child labor laws, OSHA, workers’ compensation laws, etc., we have few laws to protect the economic strata of the individual members of the working class, and fewer still to protect the smaller businesses from unfair, predatory and sometimes criminal practices of the bigger entities.

The obvious facts are that unless the government steps in, it won’t happen. Big business won’t do it, the stockholders are not interested or are from a practical standpoint powerless to intervene, the financial markets do not reward social justice remedies, individual wealth is of no help, the individual worker has no power and no rights to act on his own, and organized labor has been stripped of resources once available, such as legal protection for union shops and striker’s rights, and has become a toothless tiger.

Government action is all that is left to increase or protect the economic standing of the individual worker. At a minimum the government could: enhance present laws on predatory and unfair business practices with a view to small and medium size entities; eliminate the presumption of “at will employment” and give seasoned workers built-in job protection; provide that participation in a legitimate strike called by the recognized bargaining unit of the business is not grounds for termination of employment; re-enact the limitation on pay ranges where the cash pay from the bottom to the top within a given business cannot exceed a certain ratio – the CEO’s cash salary cannot exceed X times the bottom individual’s actual pay, for example, with all pay rates in between equitably distributed along the curve; require stockholder approval for stock dilution incentives to top executives, such as disproportionate stock options; and enact a sound, national minimum wage, with mechanisms to keep this floor current as the economy fluctuates. This need not be a universal wage, applicable to all parts of the country; it is very true that different regions may well have different influences at work, and the requirements may shift as one moves about the country. The national government might set an index against which regional differences could be applied.

The point here is that all of these issues have been ignored for years on the national level, and this is contributing to the disproportionate shifting of income and wealth. More needs to be done if the inevitable is to be avoided, but we have to start somewhere.

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